February 28th, 2024

City cuts offsite fees, but ends subsidy program

By COLLIN GALLANT on November 24, 2022.

Street and new home lots are marked with stakes in Phase 3 of the Hamptons. This week, city council approved a new schedule of offsite levy fees charged to developers to recuperate the cost of major road and utility projects that connect new communities.--News Photo Collin Gallant


Fees paid by developers to connect new subdivisions to city roads and utility mains will be cut by more than half next year, but City Hall will also remove a subsidy program that saw taxpayers pick up an additional 30 to 90 per cent of previous costs to help spur new construction.

Most of the change comes from a new calculation that add zones of more than 3,000 acres of potential industrial land in the city’s north, but also assumes slower growth and pushes off some projects.

Council approved the new system for 2023 and to allow the subsidy to expire by a 8-0 vote.

Planning superintendent Randi Buckner presented the new rates and stated the change seems substantial, but really only adjusts forecasts.

“It’s due to the reworking of the entire framework, the major difference being the remapping of the entire city where more land was introduced to developable land,” she said. “That places downward pressure on the rates, and recognizing slower growth, (which) reduces allocated costs to develop. The rates are fluid and will change over time.”

The general average rates among 12 nodes or zones would fall from $235,000 per hectare, not including the long-standing subsidy, to $102,000.

Greenfield residential developers can carve 50 lots out of a hectare (2.5 acres), meaning the estimated cost per lot would fall from a subsidized $3,200 in 2022 to $2,000 in 2023.

That correspondingly drops the Hat from the middle of the pack among Alberta cities to one of the lowest all-in costs.

“The adjustments have resulted in an overall decrease in several of the nodes (zones), but not all,” said Chamber of Commerce executive director Lisa Kowalchuk during an hour-long public hearing.

She spoke on behalf of a group of local developers, stating the overall opinion was “there’s not enough to oppose the bylaw, so let’s support it and propose recommendations,” she said.

“We still have some questions about projects and economy and the overall cost benefit (of the system) overall.”

She called on more regular review and the ability to lock in a rate ahead of annual updates to avoid adding financial uncertainty to multi-year projects.

She also stressed the chamber supports land development incentives, and would provide input on a separate program.

City Hall already, and will still, cover about two thirds of major offsite levy projects – a major road expansion to the edge of the new community, for example – through general tax or utility rate revenue.

The remainder is charged to developers whose communities benefit from the infrastructure. For the last 10 years however, that portion was also subject to a “municipal assist” program to encourage growth and gain acceptance from developers, who were skeptical of city estimates.

It paid about 40 per cent of the cost until 2018 when changes brought in a 90 per cent break in priority areas and 30 per cent elsewhere.

It was originally described as a temporary measure to ensure competitiveness that would be phased out over time.

It never was though, as council and the private sector argued change would dampen construction activity.

This fall however, administrators told council the municipal assist was included as a stop-gap until the city’s estimates on construction value and growth were proved.

On Monday, Mayor Linnsie Clark told the audience there is a new property tax abatement program available on new development, and councillors agreed the “assist subsidy” should be retired.

“I’m happy to see it decoupled,” said Coun. Alison Van Dyke. “We need to make sure we are being fair to both developers and the citizens who will bear the long-term costs of developments.”

Coun. Robert Dumanowski, who was on council for the 2012 agreement, called the new bylaw “less wishy-washy” than in previous years.

“The question was always about how much to you want to incentivize development,” he said. “This smooths out a lot of uncertainty that the old bylaw created.”

The current list of offsite projects includes new construction, or paying off existing projects totalling $404 million, of which, fees collected over the 30-year window would total $144 million.

Almost half the total refers to road projects, which the city pays a larger share due to an assumption of common benefit for all citizens.

Current City subsidy 2023 rate

North Reserve (Viterra Lands) $234,644 N/A $48,813

NW industrial Park $234,644 N/A $101,635

Box Springs BP $246,672 30% $149,968

Brier Park $234,664 N/A $149,968

Brier Run $212,644 30% $33,331

Ranchlands $139,557 30% $49,667

Burnside $233,936 30% $102,711

Established areas $234,644 90% $0

Airport lands $292,788 30% $63,411

Westvue $234,644 30% $59,637

SW Residential (Coulee Ridge) $301,400 30% $137,736

SE Residential (Southlands) $208,887 30% $168,307

Source, City of Medicine Hat

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